FLIGHT ATTENDANTS AND STEWARDS ASSOCIATION OF THEPHILIPPINES

(FASAP), PETITIONER, VS. PHILIPPINE AIRLINES, INC. (PAL), PATRIA CHIONG

& CA
G.R. No. 178083, July 23, 2008

Facts:

Petitioner FASAP is the duly certified collective bargaining representative

of PAL flight attendants and stewards, or collectively known as PAL cabin
crew personnel. Respondent PAL is a domestic corporation organized and
existing under the laws of the Republic of the Philippines, operating as a
common carrier transporting passengers and cargo through aircraft.
On June 15, 1998, PAL retrenched 5,000 of its employees, including more
than 1,400 of its cabin crew personnel, to take effect on July 15, 1998.
PAL adopted the retrenchment scheme allegedly to cut costs and
mitigate huge financial losses as a result of a downturn in the airline
industry brought about by the Asian financial crisis. During said period,
PAL claims to have incurred P90 billion in liabilities, while its assets stood
at P85 billion.
[facts for #5]
The NLRC made a detailed listing of the retrenchment scheme based
on the ICCD Masterank and Seniority 1997 Ratings. It found the
following:
1. Number of employees retrenched due to inverse seniority rule
and other reasons -- 454
2. Number of employees retrenched due to excess sick leaves -- 299
3. Number of employees who were retrenched due to excess sick
leave and other reasons -- 61
4. Number of employees who were retrenched due to other
reasons -- 107
5. Number of employees who were demoted -- 552
Total -- 1,473.
PAL determined the cabin crew personnel efficiency ratings through an
evaluation of the individual cabin crew member's overall performance for
the year 1997alone. Their respective performance during previous
years, i.e., the whole duration of service with PAL of each cabin crew
personnel, was not considered.

Issue:
Held:

[facts for #4]

PAL then subsequently rehired the 140 probationary cabin attendants
whose services it had previously terminated, and yet proceeded to
terminate the services of its permanent cabin crew personnel.
Whether or not PAL's retrenchment scheme was justified.
Under the Labor Code, retrenchment or reduction of employees is
authorized as follows:
ART. 283. Closure of establishment and reduction of personnel.- The
employer may also terminate the employment of any employee due to the

installation of labor-saving devices, redundancy, retrenchment to prevent

losses or the closing or cessation of operation of the establishment or
undertaking unless the closing is for the purpose of circumventing the
provisions of this Title, by serving a written notice on the workers and the
Ministry of Labor and Employment at least one (1) month before the
intended date thereof. In case of termination due to the installation of
labor-saving devices or redundancy, the worker affected thereby shall be
entitled to a separation pay equivalent to at least his one (1) month pay or
to at least one (1) month pay for every year of service, whichever is
higher. In case of retrenchment to prevent losses and in cases of closures
or cessation of operations of establishment or undertaking not due to
serious business losses or financial reverses, the separation pay shall be
equivalent to one (1) month pay or at least one-half (1/2) month pay for
every year of service, whichever is higher. A fraction of at least six (6)
months shall be considered one (1) whole year.

The law recognizes the right of every business entity to reduce its
work force if the same is made necessary by compelling economic
factors which would endanger its existence or stability. Where
appropriate and where conditions are in accord with law and
jurisprudence, the Court has authorized valid reductions in the work
force to forestall business losses, the hemorrhaging of capital, or even to
recognize an obvious reduction in the volume of business which has
rendered certain employees redundant. Retrenchment is only a measure
of last resort, when other less drastic means have been tried and found
to be inadequate.
The burden clearly falls upon the employer to prove economic or
business losses with sufficient supporting evidence. Its failure to prove
these reverses or losses necessarily means that the employee's
dismissal was not justified.] Any claim of actual or potential business
losses must satisfy certain established standards, all of which must
concur, before any reduction of personnel becomes legal. These are:
(1) That retrenchment is reasonably necessary and likely to prevent
business losses which, if already incurred, are not merely de minimis, but
substantial, serious, actual and real, or if only expected, are reasonably
imminent as perceived objectively and in good faith by the employer;
(2) That the employer served written notice both to the employees and
to the Department of Labor and Employment at least one month prior to
the intended date of retrenchment;
(3) That the employer pays the retrenched employees separation pay
equivalent to one (1) month pay or at least one-half () month pay for
every year of service, whichever is higher;
(4) That the employer exercises its prerogative to retrench employees in
good faith for the advancement of its interest and not to defeat or
circumvent the employees' right to security of tenure; and,
(5) That the employer used fair and reasonable criteria in ascertaining
who would be dismissed and who would be retained among the
employees, such as status, efficiency, seniority, physical fitness, age,
and financial hardship for certain workers.
[application of the law...on #1 above]

In the instant case, PAL failed to substantiate its claim of actual and
imminent substantial losses which would justify the retrenchment of
more than 1,400 of its cabin crew personnel. Although the Philippine
economy was gravely affected by the Asian financial crisis, however, it
cannot be assumed that it has likewise brought PAL to the brink of
bankruptcy. Likewise, the fact that PAL underwent corporate
rehabilitation does not automatically justify the retrenchment of its cabin
crew personnel.
The foregoing principle holds true with respect to PAL's claim in its
Comment that the only issue is the manner by which its retrenchment
scheme was carried out because the validity of the scheme has been
settled in its favor. Respondents might have confused the right to
retrench with its actual retrenchment program, treating them as one and
the same. The first, no doubt, is a valid prerogative of management; it is
a right that exists for all employers. As to the second, it is always subject
to scrutiny in regard to faithful compliance with substantive and
procedural requirements which the law and jurisprudence have laid
down. The right of an employer to dismiss an employee differs from and
should not be confused with the manner in which such right is exercised.
[on #4 above]
It is almost an inflexible rule that employers who contemplate
terminating the services of their workers cannot be so arbitrary and
ruthless as to find flimsy excuses for their decisions. This must be so
considering that the dismissal of an employee from work involves not
only the loss of his position but more important, his means of livelihood.
Applying this caveat, it is therefore incumbent for the employer, before
putting into effect any retrenchment process on its work force, to show
by convincing evidence that it was being wrecked by serious financial
problems. Simply declaring its state of insolvency or its impending doom
will not be sufficient. To do so would render the security of tenure of
workers and employees illusory. Any employer desirous of ridding itself of
its employees could then easily do so without need to adduce proof in
support of its action. We can not countenance this. Security of tenure is a
right guaranteed to employees and workers by the Constitution and
should not be denied on the basis of mere speculation.
On the requirement that the prerogative to retrench must be exercised in
good faith, we have ruled that the hiring of new employees and
subsequent rehiring of "retrenched" employees constitute bad faith; that
the failure of the employer to resort to other less drastic measures than
retrenchment seriously belies its claim that retrenchment was done in
good faith to avoid losses; and that the demonstrated arbitrariness in the
selection of which of its employees to retrench is further proof of the
illegality of the employer's retrenchment program, not to mention its bad
faith.
[on #5 above]
Prominent from the above data ( in facts) is the retrenchment of cabin
crew personnel due to "other reasons" which, however, are not
specifically stated and shown to be for a valid cause. This is not allowed

because it has no basis in fact and in law.

Moreover, in assessing the overall performance of each cabin crew
personnel, PAL only considered the year 1997. This makes the evaluation
of each cabin attendant's efficiency rating capricious and prejudicial to
PAL employees covered by it. By discarding the cabin crew personnel's
previous years of service and taking into consideration only one year's
worth of job performance for evaluation, PAL virtually did away with the
concept of seniority, loyalty and past efficiency, and treated all cabin
attendants as if they were on equal footing, with no one more senior
than the other.
WHEREFORE, the instant petition is GRANTED. x x x FINDING
respondent Philippine Airlines, Inc. GUILTY of illegal dismissal [buti nga!
]
3 rulings, marked with numbers enclosed in (). Just choose 1.
FLAVIO S. SUAREZ, JR., et. al. vs. NATIONAL STEEL CORPORATION
G.R. No. 150180 (October 17, 2008)

Facts:

Respondent National Steel Corporation was engaged in the business of

manufacturing steel products needed for pipe making, ship building, canmaking and production of appliances. Sometime in 1994, respondent
suffered substantial financial losses due to an increase in the volume of
steel products manufactured by foreign countries. With this
development, respondent adopted an organizational streamlining
program that resulted in the retrenchment of seven hundred (700)
employees in its main plant in Iligan City, among whom were herein
petitioners. [The retrenched employees received a notice and a
separation package including, among others, 2 months salary for every
year of service, 13th month pay, and leave balance credits.] After having
been paid their separation benefits, the employees, including herein
petitioners, each executed and signed a release and quitclaim, written in
English and containing a translation in the Visayan dialect in the same
document. The release and quitclaims were acknowledged before a
notary public.
Nothing was heard from the retrenched employees, until February 1997
or about two and half years after their separation from the company,
when herein petitioners wrote respondent demanding payment of
retirement benefits under the CBA.
They claimed that they were
qualified for optional retirement after having rendered services for at
least ten (10) years when they were retrenched on August 18, 1994.

Issue:
Held:

[Labor arbiter dismissed their claims. NLRC reversed.] CA declared that

petitioners were no longer entitled to retirement benefits after having
received the separation pay, and were precluded from claiming such
benefits because of their quitclaims.
Whether these retrenched employees that had already received their
separation pay can still recover retirement benefits.
NO. (1)
The retirement plan of respondent company reveals that an
employee who was terminated for cause is not entitled to retirement
benefits and thus explicitly prohibits the recovery of retirement benefits
in cases of terminations for cause. Here, there is no dispute that
petitioners were separated from the service for cause, as it was due to a

valid retrenchment undertaken by respondent company. Unarguably,

retrenchment is recognized as one of the authorized causes for
termination of employment under Article 283 of the Labor Code, which
states:
The employer may also terminate the employment of any employee due to
the installation of labor-saving devices, redundancy, retrenchment to prevent losses
or the closing or cessation of operations of the establishment or undertaking unless
the closing is for the purpose of circumventing the provisions of this title, by
serving a written notice on the workers and the Department of Labor and
Employment at least one (1) month before the intended date thereof. In case of
termination due to the installation of labor-saving devices or redundancy, the
worker affected thereby shall be entitled to a separation pay equivalent to at least
one (1) month pay or to at least one (1) month pay for every year of service,
whichever is higher. In case of retrenchment to prevent losses and in cases of
closures or cessation of operations of establishment or undertaking not due to
serious business losses or financial reverses, the separation pay shall be equivalent
to at least one (1) month pay or at least one-half (1/2) month pay for every year of
service, whichever is higher. A fraction of at least six (6) months shall be
considered as one (1) whole year.

Having been separated from employment due to an authorized cause,

petitioners are barred from receiving retirement benefits pursuant to
Article X(E) of respondents retirement plan. With the inclusion of such
provision in the retirement plan, respondent categorically disallows
payment of retirement benefits to retrenched employees. They are only
entitled to payment of separation pay in accordance with Article 283 of
the Labor Code.
In their Reply, petitioners argue that the term terminations for
cause under Article X(E) of the retirement plan should be read to only
include terminations for just cause under Article 282 of the Labor
Code, or to situations wherein it is the employee that is at fault. This
Court is not persuaded by this argument. Petitioners concede that the
Labor Code allows terminations by the employer for just causes under
Article 282 or authorized causes under Articles 283 and
284. Terminations covered by Articles 282 to 284 are all terminations by
the employer for a lawful cause. In the past, this Court has had occasion
to use the term dismissal for cause to refer to dismissals for just and/or
authorized cause. Respondents retirement plan in referring to
terminations for cause plainly does not distinguish between just cause
and authorized causes for termination. Moreover, there is nothing in the
said retirement plan which limits the term terminations for cause to
terminations under Article 282.
(2) Apart from the abovementioned provision in the retirement plan,
provisions of the CBA between the company and its employees further
militate against petitioners contention that they are entitled to both
separation pay and retirement benefits. [It] readily shows that retirement
benefits shall be granted only to those employees who, after rendering
at least ten (10) years of continuous services, would retire upon reaching
the mandatory retirement age, or would avail of optional voluntary
retirement.

A CBA is more than a contract; it is a generalized code to govern a

myriad of cases which the draftsmen cannot wholly anticipate. It covers
the whole employment relationship and prescribes the rights and duties
of the parties. If the terms of the CBA are clear and have no doubt upon
the intention of the contracting parties, the literal meaning of its
stipulation shall prevail. However, if the CBA imports ambiguity, then
the parties intention as shown by their conduct, words, actions and
deeds -- prior to, during, and after executing the agreement, must be
ascertained. That there is an apparent ambiguity or a failure to express
the true intention of the parties, especially with regard to the retirement
provisions of the 1994-1996 CBA, is evident in the opposing
interpretations of the same by the Labor Arbiter and the CA on one hand
and the NLRC on the other. It is settled that the parole evidence rule
admits of exceptions. A party may present evidence to modify, explain
or add to the terms of the written agreement if he raises as an issue,
among others, an intrinsic ambiguity in the written agreement or its
failure to express the true intent and agreement of the parties thereto.
In this instance to resolve all doubts as to the proper interpretation
of the relevant CBA provisions, it was imperative for the CA to determine
the true intent of the parties to the agreement. This juristic principle is
supported by the following provision of law found in the New Civil Code:
Article 1371. In order to judge the intention of the
contracting parties, their contemporaneous and subsequent
acts shall be principally considered.

Thus, while the CBA, on its face, does not contain an express prohibition
of payment of retirement benefits to retrenched employees, the parties
may still prove it by means of contemporaneous and subsequent acts of
the parties to the agreement, such as the execution of the affidavits by
the NASLU-FFW officers and respondents managers.
(3) We likewise uphold the CAs finding that petitioners voluntarily
executed and signed a release and quitclaim after receiving their
separation package, acknowledging full and final payment of all benefits
that they may be entitled to in relation to their employment. The validity
of quitclaims executed by laborers has long been recognized in this
jurisdiction. In Periquet v. National Labor Relations Commission, this
Court ruled that not all waivers and quitclaims are invalid as against
public policy. If the agreement was voluntarily entered into and
represents a reasonable settlement of the claims of the employee, it is
binding on the parties and may not later be disowned simply because of
a change of mind. Such legitimate waivers resulting from voluntary
settlements of laborers claims should be treated and upheld as the law
between the parties.
In the instant case, there is no showing that petitioners were forced or
duped by respondent into signing the release and quitclaim. In their
sworn quitclaim, they freely declared that they received full separation
pay as well as all other amounts due them by reason of their
employment. Each quitclaim was written in English and in the Visayan
dialect which petitioners very well understand. Besides, the quitclaim

represents a reasonable and fair settlement of petitioners claims as the

separation package consisted of two (2) months salary for every year of
service, leave balance credits, 13th month pay, uniform plus rice subsidy
differential, salary differential and signing bonus. Indeed, nothing on the
face of their quitclaim has been shown as unconscionable. In the
absence of evidence showing coercion or intimidation in its execution,
we are constrained to uphold the appellate courts conclusion that the
execution of the release and quitclaim was valid.